Investment Advice Via Mass Media

If you follow mass media for your investment advice, you need to be very careful. And many investors diligently watch the business news networks and financial commentary daily.

I am not a huge fan of financial media in general. Especially the talking heads (i.e., pundits) and business commentators.

Why? 

Extremists

Some pundits like to take extreme positions in the hope that (occasionally) they will hit a home run.

Even a broken clock is right twice a day. But they will get it wrong much of the time.

Listen to their views. Try to understand their logic.

Decide for yourself if the advice of the day will be a winner.

And keep note of their track record yourself. Pundits who like to take extreme positions will gladly remind you of every winner. They are often less helpful with their dogs.

Herd Mentality

Other pundits and commentators find safety in following the herd.

They tend not make the next great prediction, instead they play for safety. If they are right, great. If wrong, well hey almost every other expert was also wrong.

We saw this in a previous post on forecasting the recession in Hong Kong.

The herd mentality is very common in any industry as well as in the business world.

If you want reassurance, these are the people to listen to. But you might not get much insight.

The World Changes Quickly

There are some decent experts. They provide well thought out opinions. Unfortunately those opinions are based on events at the time the comments were made.

The world is a rapidly changing place. And that can quickly impact markets and investments.

What may have been sound advice yesterday, may be faulty today.

Again, feel free to listen to expert commentary. You can improve your investment education by following general information.

But I would hesitate to take as gospel specific investing advice via mass media outlets. It may be out of date by the time you hear it. Or others may have been able to buy in before you, raising the purchase price and making it less attractive.

As well, you need to invest based on your unique situation. Someone speaking on television has no idea what your needs are.

Ignore the Media

Tune out the daily chatter on investments in the media.

Stick with your pre-planned Investment Policy Statement. The one that deals with your specific investment objectives and constraints over the long run. Do not get caught up in the daily machinations in the papers, television, internet, etc.

Today’s humorous example of how quickly things can change (or how quickly commentators can change their minds) comes courtesy of Kate at Small Dead Animals.

Note that the initial draft indicates Bloomberg staff expected a retreat in the gold price (the permalink usually comes from the article title or is written to reflect the article content). Then the final version did a 180 degree turn to predict further advances.

If they had published the draft, you might have sold your gold holdings. But now you may want to buy gold. More than a little confusing for an investor.

And I see now that Bloomberg has slightly changed the headline. However, the article still states that demand for gold may be on the rise.

I suggest you read the story quickly. By tomorrow, the writers may be back in the “gold is heading for a decline” mode.

1 Response » to “Investment Advice Via Mass Media”

  1. I believe you have mentioned some very interesting details , thanks for the post.

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